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SR-021908-8B~® ~;tYO, City Council Report Santa Monica City Council Meeting: February, 2008 Agenda Item: ~'~ To: Mayor and City Council From: Carol Swindell, Director of Finance Subject: Five Year Financial Forecast, Public Comment on Budget Priorities Including Comments on Community Development Block Grant and Home Investment Partnership Act (HOME) Programs and Discussion of Community Priorities for FY2008-09 Budget Development. Recommended Action Staff recommends that City Council: 1) receive the FY2008-09 through FY2012-2013 Five Year Financial Forecast as background for development of the FY2008-09 budget; 2) receive public comments on FY2008-09 budget priorities, including Community Development Block Grant (CDBG) and Home Investment Partnership Act (HOME) program funds; and 3) based on this information provide staff with direction on Community Priorities to guide the development of the FY2008-09 budget and FY2009-10 budget plan. Executive Summary This report provides an update on the current status of the economy and its potential impact on budget revenues; presents a forecast of revenues and expenditures for the major City funds; and provides an update on work efforts to the key Community Priorities for the current year. The report requests that Council receive public comments on community budget priorities and provide direction to staff regarding Council recommendations on budget development for FY2008-09. The economy has been giving mixed signals for the past few months which have not been encouraging and even characterized as "unstable" worldwide. The economic uncertainty creates difficulties in revenue planning for the future. For this year's Five Year Financial Forecast, staff has projected three revenue scenarios. The Baseline Scenario assumptions are detailed later in the report and are the best estimates of expected revenues. It would be considered the "most likely" scenario. The "Worst" Case Scenario projects a recession and its impacts on Property, Sales, Business License, Transient Occupancy and Parking Facility taxes along with a loss of Utility 1 User Tax revenue due to telecommunication changes. The "Best" Case Scenario assumes very little economic downturn impact and increases Sales, Property and Business License taxes above Baseline along with the impacts of a new fee study in FY2011-12. On the expenditure side, the Baseline and "Worst" Case include annual labor increases of 4% while the "Best" Case reduces the labor increase in years FY2009-10 through FY2012-13 at 3% consistent with the average estimated Consumer Price Index for Santa Monica. The Five Year Financial Forecast for the General Fund continues to reveal revenues growing at a slower rate than expenditures. Under the assumptions in the Baseline Scenario, the City can balance its budget in FY2008-09, but for the next four years the budget deficit grows from $3.6 million to $16.4 million. It is important to note that the Baseline Scenario does not factor in labor costs above cost-of-living increases, additional positions, or revenue reductions from a loss of Utility Users Tax. As was stated last year, additional growth in programs, enhanced labor benefits, more funding for deferred maintenance and replacement of basic infrastructure will require additional resources. Other funds are also briefly presented and also show structural imbalances in their forecasts. As always with limited resources, priorities for funding will need to be made during the budget process. To begin the prioritization, community priorities have been sought over the past four months from community meetings, a-mails to budget(a2smgov.net and comments from City boards and commissions. The majority of comments received to date, identified issues of concern as • Mobility • Public Safety and Violence Prevention • Livable neighborhoods Discussion Economic Update National and State Economies Economists are predicting the national economy to continue its slowdown over the next six to twelve months with a 42% chance of recession. Impacting the economy at all economic levels is the fallout of the sub-prime mortgage problem. The housing market is in one of its deepest slumps ever. Existing home sales in December were down 13% from a year earlier with the median price dropping 6%, the largest year-to-year drop on record. December housing starts were down 38% from a year earlier. In addition, the national unemployment rate unexpectedly rose to 5.0% in December and is projected to increase slightly in 2008 and 2009 and the Index of Leading Economic Indicators 2 declined in November for the seventh time in the last eleven months. The decline for the last six months is 1.2%, the first reading greater than 1 % since the 2001 recession. A decrease of 1 % is often an indicator that a recession is two quarters away. Inflation has been increasing recently due to higher energy prices although "core inflation", excluding food and energy, has moderated to a rate acceptable to the Federal Reserve Board (FED). The December 2007 UCLA Anderson Forecast projected that the annualized growth rate of Real Gross Domestic Product (GDP) for the fourth quarter 2007 and first quarter 2008 will be below 1% before recovering slightly to a 1.9% average rate for all of 2008. This forecast was released prior to the release of December economic statistics and recent forecasts by a number of economists are more pessimistic. Consumer spending, which accounts for almost 70% of total GDP, is showing signs of weakness, although still growing. Over the past six months actions by the FED to stimulate the economy have lowered the yield on 2-year Treasury notes by 2%. However, the economy continues to suffer and further FED action is expected. The economic outlook for California is essentially the same as for the nation. Unemployment is increasing and the slumping housing market could lead to further weakness in the economy, particularly if it gets to the point where consumer spending is affected. Growth in State personal income and retail sales over the next 12-24 months is expected to be less than in recent years, seriously impacting the State of California budget revenues. Gov. Arnold Schwarzenegger has declared a fiscal emergency and released his blueprint for closing an estimated $14 billion budget deficit, a gap so large that the State will either have to raise taxes or cut programs in order to resolve it. The potential exists for the State to borrow property taxes from cities, counties and special districts, which could further exacerbate the budget challenge for many local governments that are already seeing decreases in tax revenues. Under the provisions of Proposition 1A, the State may borrow up to 8% of total local property taxes under certain conditions. However, the impact to each local agency may be greater or less than 8% depending on how the State structures the borrowing 3 Santa Monica Economy Within this context, the City's economy is expected to be weaker over the forecast period than in the last few years. Historically, Santa Monica has tended to not be as negatively affected as some areas in tough economic times due to a relatively strong, diversified economy. However, the national and state economies are having an impact on Santa Monica. Construction activity as measured by building permit revenue is down due to fewer permits being issued and smaller total valuation of permits issued. Sales tax revenue have been flattening in recent quarters reflecting a decline in new vehicle sales and leases, which make up almost 22% of Santa Monica's sales tax receipts. New auto sales for the quarter ended September 30, 2007 were down 12.7% from the same quarter a year ago, following national auto sales trends. Retail sales activities will also be negatively impacted during the remodel of Santa Monica Place, with an expected impact on sales tax revenue of $1.0 million during the construction period. The number of property transfers has decreased significantly, which will likely result in decreased property tax revenues over the next few years. The ongoing Writers' Guild strike may also have a negative impact on Santa Monica's economy and an extended slump in the housing market could lower property values. Economic activity from tourism remains strong due to the declining value of the dollar and the commercial real estate market also remains healthy, but both could be negatively affected if the national and international economies enter a prolonged and significant downturn. Five Year Forecast of Maior Funds Each year staff projects the status of the City's major funds for the five year period into the future, with a primary focus on the General Fund. The projections update the status of the available fund balances at the end of last fiscal year (6/30/2007), review current revenue received to date (FY2007-08), update economic forecast information, project revenue growth, identify expenditure growth assumptions and project expenditure growth. These forecasts set the stage for the development of the budgets for next year. 4 The assumptions used in preparing the FY2007-08 through 2012-13 Five Year Forecast reflect a review of information concerning the national, state, regional, and local economies. A number of respected sources of data were used including the UCLA Graduate School of Management, the Los Angeles Economic Development Corporation (LAEDC), chief economists of several different financial institutions, and various consulting firms. General Fund This year three scenarios are prepared based on staff's assessment of Baseline (most likely revenue case with conservative expenditure case), Best Case (minimal recession and UUT impact with a modified expenditure case of tamed inflation) and Worst Case (all recession and UUT impact with conservative expenditure case). For details in the development of the three scenarios, please see the Attachment A. BUDGET GAPS With the revenue projections plus available balance sheet resources and the expenditure projections, the City financial forecast shows a structural deficit in both the baseline and worst case scenarios. A structural deficit is defined as a budget where ongoing revenues are not sufficient to cover ongoing expenditures at current service levels. The baseline scenario shows a General Fund deficit beginning in FY2009-10 of $3.7 million and growing to $16.4 million in the fifth year of the Forecast. 5 • Slower revenue growth • Santa Monica Place renovation • Two new hotels • Mainfenance of UUT on telecomm • 4% CPI on labor costs • CPI on Supplies & Expenses • No additional positions The worst case scenario shows a General Fund structural deficit of $8.0 million beginning next fiscal year (FY2008-09) due to the reduced revenue projections identified above. This deficit grows to $32.6 million in the fifth year. • Recession impact on most revenues • Loss of UUT on telecomm • 4% CPI on labor costs • CPI on Supplies and Expenses The "Best" Case Scenario, which projects a rosier revenue outlook and lower labor projections, is essentially balanced throughout the full five year period. This is by far the 6 least likely of all scenarios since it assumes that the economic downturn will not impact Santa Monica to any significant degree and that all labor costs increases will be held to 3% for years two through five. Other Funds • No recession impact • Maintaining UUT on telecomm • Higher Santa Monica Place revenues • 3% CPl on labor costs after 07/08 • CPI on Supplies and Expenses Other major funds that are reviewed during the Five Year Forecast fall into three categories: • Enterprise funds that are operated to generate sufficient revenues to sustain necessary operation and capital needs o Airport /Special Aviation o Big Blue Bus o Solid Waste o Wastewater o Water • Enterprise funds that require General Fund subsidies in order to meet their operating and capital needs o Cemetery o Civic Auditorium o Pier • Special Revenue Funds where fund are restricted for specific purposes o Beach 7 o Housing Authority For these funds, only one expenditure scenario is developed which is the baseline forecast where labor costs are increased from the FY2008-09 Budget Plan year at 4% per year beginning in FY2009-10. In general, fee and utility rate revenues are assumed to increase at CPI. Where funds show a structural deficit, higher fee and rate increases are proposed as alternatives. In summary, the funds status is: NON-SUBSIDIZED ENTERPRISE FUNDS Airport -During the five year forecast period, the fund maintains a positive fund balance; however, only minimal capital expenditures are assumed and no re- payments to the General Fund are assumed on loans totaling $9.5 million until 2015 when rental rates on lease contracts are due for renewal and can be adjusted to market rate. Recent loans to the Airport fund include $2.4 million for capital expenditures in FY2004-05 and $250,000 this year for litigation costs related to airport operating issues with the Federal Aviation Administration. Big Blue Bus -The forecasting of the status of the Big Blue Bus Fund is different from other funds in that funds available to the Big Blue Bus (BBB) are not always held by the City but are available from the Los Angeles Metropolitan County Transportation Authority (MTA) in the form of grant subsidy funds per the formula share allocated by the MTA to BBB. Annual allocations of funds not spent in the year of allocation are available up to two years later for use by the transit system. The majority of the subsidy funds, including State transit Assistance Fund (STA), .Transportation Development Act funds (TDA), Proposition A and Proposition C are sales tax based and grow by the sales tax growth rate of the County of Los Angeles. For the purposes of this forecast these funds are increased based on the sales tax growth assumptions based on UCLA Anderson Forecast modified by MTA forecasts and Big Blue Bus staff assessments. The baseline forecast includes additional STA revenues from Proposition 42 beginning in FY2008-09 of $1.2 million. Given the State's budget 8 crisis, it is not clear whether the State will borrow transportation funds again to close the budget gap. At this moment, the Big Blue Bus staff is cautiously optimistic and believes that STA funds will be left intact A structural operating deficit still exists for the BBB and unless a fare increase is adopted, the Big Blue Bus will be required to use available prior year subsidy funds in FY2008-09 ($1.0) and FY2009-10 ($2.6). In future years the forecast shows insufficient revenues to cover expenditures. BBB anticipates proposing to Council a fare increase for FY2008-09. A study is currently being conducted to assess operational efficiencies and financial capacity of the organization. Solid Waste Fund -The baseline forecast for the Solid Waste Fund assumes rate increases by CPI and services provided by City staff remaining at the FY2007-08 levels. At this rate, the Fund's expenditures will exceed its revenues, depleting its Rate Stabilization Reserve ($0.5 m) in FY2008-09. The structural deficit continues each year with dwindling reserves in FY2009-10 ($1.8 m.) and FY2010-11 ($0.6 m) until FY2011-12 when all reserves are depleted and the fund is in a deficit of $0.8 m growing to $2.7 m in FY2012-13. In November, Council authorized the City to take control of all commercial collections, beginning January 2009. Staff has also been reviewing options for a public-private partnership regarding transfer station operations. These changes are not included currently n the baseline forecast, but will impact the forecasted fund balance and future rate changes. An updated fund balance forecast will be presented to Council in the next few months as a new public-private partnership for the transfer station is implemented. Water Fund - Under a baseline scenario where rates increase at CPI, the fund in FY2009-10 will use almost $900,000 of the $1.0 million Rate Stabilization Reserve to fund operations. By FY2010-11, all reserves are depleted (operating, 9 rate stabilization and capital) with a total fund deficit of $0.8 million growing to $9.6 million with no reserve funds. Based on this analysis, rate increases above CPI are required. The baseline forecast does not consider any impacts of a new Water Master Plan, which is expected to be developed over the next several months. The Water Fund is undergoing a rate study to evaluate the fund's ability to sustain services. It is anticipated that rate recommendations, along with more detailed financial information, will be presented to City Council in February with implementation of changes prior to the end of the fiscal year. Wastewater Fund -The baseline scenario reflects a fund deficit in the current fiscal year of 6.0 million growing to $46.4 million in FY2012-13. However, the fund has fronted $6.5 million in earthquake related construction funds that are anticipated to be reimbursed by FEMA by FY2009-10. If these funds were loaned by another fund, the Wastewater Fund will end the fiscal year on a more positive note. Staff is studying other factors that could improve the fund position, but these are not included in the baseline scenario. These options, along with proposed rate increases will be presented to City Council in February for consideration. SUBSIDIZED ENTERPRISE FUNDS Cemetery Fund -Under the baseline scenario, subsidies from the General Fund to the Cemetery Fund are necessary throughout the five year forecast period. FY2008-09 requires $0.3 million growing to $0.6 million in FY2012-13. Over the past two years, staff has pursued several measures to improve the maintenance and operations of the Cemetery and a Business Plan is currently in the final stages of completion. It is anticipated that the Plan will call for expansion capacity on the Cemetery property requiring additional capital 10 investments which will over time return higher revenues to the Fund. Financing options will be included in the Business Plan. Civic Auditorium -The Civic Auditorium requires an ongoing annual General Fund subsidy of $0.7 million in FY2008-09 and from $1.5 to 1.6 million in FY2009-10 through FY2012-13. This baseline forecast does not include major infrastructure improvements, which would increase the subsidy. Pier Fund -The Pier Fund generates approximately $3.2 million in revenue and has operating expenses of $4.2 million for FY2007-08. The structural deficit requires a General Fund subsidy for the Fund to remain in balance. The subsidies required annually are $1.1 million in FY2008-09 growing to $1.6 million in FY2012-13. As with the Civic Auditorium Fund, the Pier Fund baseline forecast does not include major infrastructure improvements. CIP needs have been identified as $5.3 million in FY2008-09 for infrastructure improvements with $3.0 million annually thereafter for ongoing maintenance and capital programs. Housing Authority Fund -This year, the Five Year Financial Forecast indicates the Housing Authority for the first time will require subsidy funds in order to maintain the same level of service currently provided. Declining Federal subsidies have reduced the funding below the level needed to administer the City's housing programs. The subsidies required annually are $0.2 million in FY2008-09 growing to $0.5 million in FY20012-13. SPECIAL REVENUE FUNDS Beach Fund - A baseline scenario for the Beach Fund where the Annenberg Community Beach House operating expenditures are incorporated into the budget in FY2009-10 shows a need for Beach Fund subsidies of $0.2 m in FY2010-11 growing to $2.0 million in FY2012-13. This scenario does not include any County Lifeguard costs above CPI. The City and the County have been on a 11 month-to-month agreement since December 31, 2006. Also not included are additional one-time costs for the refurbishment of the Lifeguard Headquarters building. An estimated $1.6 million will be requested by Community & Cultural Services Department as part of the FY2008-09 Capital Improvement Program budget requests. Each of these funds will be updated and further addressed during the development, presentations and discussions on the FY2008-09 budget. Community Priorities Update on FY2007/O8 Community Priorities Work Plan With the adoption of the FY2007-08 budget, Council identified three areas of special work plan focus for this year's budget including: Homelessness, Land Use and Circulation Element Update and Youth.. In addition, overall Community Priorities are: Culture, Sustainability, Education, Customer Service, Capital Needs & Infrastructure and Recreation & Active Living Attachment A, identifies work plan accomplishments to date on Community Priorities for FY2007-08. In addition to these, this year staff has identified two other areas of priority and focus: maintaining financial stability and ensuring adequate resources to meet workload and service demands. Council had requested that staff provide information at the time of the mid-year budget review on available youth employment services and investigate options for expanding these opportunities. The results of this assessment are transmitted to Council in a separate Information Item. The report provides a menu of options for employing youth ages 14-24 for consideration. Given the cost implications of the options, staff would need to evaluate them in the context of planning next year's budget, considering the availability of resources and priority of other community needs. 12 Community Outreach for FY2008-09 Budget Priorities During the months of November, December, and January five neighborhood meetings were cosponsored by the City Manager's Office and the five active neighborhood associations. The meetings conducted throughout Santa Monica were focused on receiving comments from the community regarding their priorities for City programs and services. Comments received at the meetings through discussion and on comment cards, through a-mail to the budget a-mail address (budget@smgov.net) or City Manager's e- mail box, and postal mail (Attachment C) can be categorized into the following major areas: Mobility Mobility issues continue to be of major concern among residents. Residents expressed frustration with traffic and described the difficulty of getting around and through the City. While acknowledging that longer-term solutions are in progress, residents expressed a need for more immediate actions. Improved enforcement of traffic laws and additional left turn lanes were suggested as methods to improve traffic in Santa Monica. Community members agreed that a balanced approach to parking is needed; one that gives residents and visitors equal consideration. Many agreed on the need to encourage the use of alternative transportation to help alleviate traffic and decrease parking demands. Many suggested that the City improve crosswalks to increase pedestrian visibility, increase the number of flashing smart crosswalks, increase the length of time provided for pedestrian to clear crosswalk before signal changes, and assess the use of diagonal crosswalks to avoid pedestrian and vehicle conflicts. 13 Public Safety and Violence Prevention Another message was the concern for public safety. Some requested improved communication between the Police Department and residents, increased police presence in neighborhoods, and continued efforts to combat youth violence. Residents were receptive to the new policing strategy and the desire to create improved partnerships between the community and the Police Department. As the number of bicycle riders increases, community members expressed the needs for more innovative ways to ensure bicyclist safety (i.e. bike only streets, bike pathways along congested streets, improved bike lanes & signage) and enforcement to ensure that bicycle riders are stopping at stop signs and obeying all traffic laws. Livable Neighborhoods Street Lighting, Underground Utilities, Forest Neighborhood Aesthetics, Community Some residents expressed concern that their neighborhoods are too dark at night and need additional neighborhood lights. Community residents felt that improved street lighting would deter crime and improve pedestrian and bicycle safety. A few residents recommended that utility lines should be placed underground and recommended formation of assessment districts to identify and fund those projects or identify the most opportune time to move forward on these projects based on other infrastructure improvements. Residents expressed their desire that neighborhood improvements be aesthetically pleasing. Community members expressed concern over the community forest and the proposed removal of the ficus trees on 2nd and 4th Streets. 14 More detailed summaries of each Community Meeting are included in Attachment C, as well as letters from the City's Commissions and Boards. In addition, public comments will be received tonight. Financial Impacts & Budget Actions There is no immediate budget impact as a result of receiving the information provided tonight. Direction provided by City Council based on information in this staff report and public input received during the Council meetings will assist in determining the direction to be taken in deciding budget recommendations for FY2008-09. Prepared by: Janet Shelton, Budget Manager Approved: Carol Swindell ° Director of Finance Forwarded to Council: Manager Attachments: A -Five Year Forecast B -Community Priority Update C -Community Comments 15 ATTACHMENT A FIVE 1 ~~~ FINANCIAL FORECAST FY2008-09 through FY2012-13 Economic Uadate National and State Economies Economists are predicting the national economy to continue its slowdown over the next six to twelve months with a 42% chance of recession. Impacting the economy at all economic levels is the fallout of the sub-prime mortgage problem. It has lowered housing sales which are down 20% nationally and median housing prices which are down 3.3%. In addition, the national unemployment rate unexpectedly rose to 5.0% in December and is projected to increase slightly in 2008 and 2009 and the Index of Leading Economic Indicators declined in November for the seventh time in the last eleven months. The decline for the last six months is 1.2%, the first reading greater than 1% since the 2001 recession. A decrease of 1% is often an indicator that a recession is two quarters away. Inflation has been increasing recently due to higher energy prices although "core inflation", excluding food and energy, has moderated to a rate acceptable to the Federal Reserve Board (FED). The December 2007 UCLA Anderson Forecast projects that the annualized growth rate of Real Gross Domestic Product (GDP) for the fourth quarter 2007 and first quarter 2008 will be below 1 % before recovering slightly to a 1.9% average rate for all of 2008. Consumer spending, which accounts for almost 70% of total GDP, is showing signs of weakness, although still growing. Over the past six months actions by the FED to stimulate the economy have lowered the yield on 2-year Treasury notes of 2%. The economic outlook for California is essentially the same as for the nation. Unemployment is increasing and the slumping housing market could lead to further weakness in the economy, particularly if it gets to the point where consumer spending is affected. Growth in State personal income and retail sales over the next 12-24 months are expected to be less than in recent years, seriously impacting the State of California budget revenues. Gov. Arnold Schwarzenegger has declare a fiscal emergency and released his blueprint for closing an estimated $14 billion budget deficit, a gap so large that the State will either have to raise taxes or cut programs in order to resolve it. The potential exists for the State to borrow property taxes from cities, counties and special districts, which could further exacerbate the budget challenge for many local governments that are already seeing decreases in tax revenues. Under the provisions of Proposition 1A, the State may borrow up to 8% of total local property taxes under certain conditions. However, the impact to each local agency may be greater or less than 8% depending on how the State structures the borrowing Santa Monica Economy Within this context, the City's economy is expected to be weaker over the forecast period than in the last few years. Historically, Santa Monica has tended to not be as negatively affected as some areas in tough economic times due to a relatively strong, diversified economy; however, sales tax revenues have been flattening out the last few A-1 quarters, and the number of property transfers has decreased significantly, which will likely result in decreased property tax revenues over the next few years. Economic activity from tourism remains strong due to the declining value of the dollar and the commercial real estate market also remains healthy. The national and state economies are having an impact on Santa Monica. Construction activity as measured by building permit revenue is down due to fewer permits being issued and smaller total valuation of permits issued. The retail sales flattening reflects the decline in out the last few new vehicle sales and leases, which make up almost 22% of Santa Monica's sales tax receipts. New auto sales for the quarter ended September 30, 2007 were down 12.7% from the same quarter a year ago, following national auto sales trends. Retail sales activities will be negatively impacted during the remodel of Santa Monica Place, with an expected impact on sales tax revenue of $1.0 million during the construction period. The ongoing Writers' Guild strike may also have a negative impact on Santa Monica's economy and an extended slump in the housing market could lower property values. A-2 Five Year Forecast of Maior Funds Each year staff projects the status of the City's major funds for the five year period into the future, with a primary focus on the General Fund. The projections update the status of the available fund balances at the end of last fiscal year (6/30/2007), review current revenue received to date (FY2007-08), update economic forecast information, project revenue growth, identify expenditure growth assumptions and project expenditure growth. These forecasts set the stage for the development of the budgets for next year. The assumptions used in preparing the FY2007-08 through 2012-13 Five Year Forecast reflect a review of information concerning the national, state, regional, and local economies. A number of respected sources of data were used including the UCLA Graduate School of Management, the Los Angeles Economic Development Corporation (LAEDC), chief economists of several different financial institutions, and various consulting firms. A-3 General Fund REVENUE PROJECTIONS The baseline forecast is based on the assumption that the declining national and state economies will affect Santa Monica revenues over the first part of the forecast period. Growth in the major economy-driven tax revenues such as sales taxes, business license taxes, and property taxes are expected to be below historical trends for the first two to three years of the forecast period. Tourism is projected to remain relatively strong and the current high hotel occupancy rates are expected to continue, but the recent high growth in average room rates over the last several years is assumed to moderate. The baseline forecast also takes into accouht certain known impacts including the eighteen month closure of Santa Monica Place and the opening of two small hotels in the City. Potential loss of Utility Users Taxes from telecommunication due to legal challenges is not included in the baseline. The FY2007-08 estimated actual revenues are the starting point for revenue projections for future years. These revenues have been updated to reflect current year-to-date actual receipts. Overall revenue adjustments in FY2007-08 reflect additional revenues of $0.35 million primarily due to higher Property, Business License, Transient Occupancy, Real Property Transfer, and Parking Facilities taxes, plus increased Rental Revenue, Interest Income, Parking Permits and State Mandates (SB90) Reimbursement, along with higher Residential Building Report and Document Imaging fees. These increases are offset by revenue decreases in Utility Users Taxes, Sales Taxes, Vehicle License Fees and less Building Permit, Plan Check and Zoning Approval/Variance fees. Details of the revenue changes are presented in the Review of Mid-Year 2007-08 Budget Status staff report also presented on the Council agenda for February 12, 2008. Future years' revenue growth is based on a variety of factors, depending upon the revenue source. The five major General Fund revenue sources are projected for the Baseline Scenario as follows: • Utility Users Tax -Grows by 3% per year for natural gas, cable television and city utilities. Telephone is increased at 1% per year reflecting a decrease in hardwire services offset by an increase in wireless services. Taxes from electric utilities are driven by Southern California Edison rates and are projected to grow by 3% in FY2008-09 increasing in FY2009-10 and FY2010-11 to reflect anticipated rate increases, lowering again to 3% in the last two years of the forecast. The results are the following growth in UUT revenues: FY2008-09 - 2.2%, FY2009-10 and FY2010-11 - 4.9%, FY2011-12 - 2.9%, FY2012-13 - 2.3%. • Sales Tax -Revenues are expected to grow slowly in the first two years to reflect slowing economic conditions and have moderate growth for the remainder of the A-4 forecast period. Baseline growth for FY2008-09 is 3% from ongoing FY2007-08 revenues. FY2009-10 and FY2011-12 are projected at 4.5% growth and FY2012-13 is projected at 5.5%. Additionally, the forecast is adjusted to account for loss of revenue for eighteen months from the closure of Santa Monica Place for renovation, and increased revenue from the renovated facility after it re-opens • Property -Tax -Housing market softening is projected to affect Santa Monica in the short term. The number of property sales has decreased significantly over the last year and the trend in housing prices has been mixed. Most economists believe that the housing market decline will not hit bottom until some time in 2008 and will remain weak into 2009. In addition, the slowing economy may spill over into the commercial real estate market. Based on these conditions, it is anticipated that the assessed value growth in Santa Monica will continue, but at a slower rate of growth than experienced of the last several years. The rates of City revenue increases, after accounting for the impact of the Earthquake Recovery Redevelopment Project Area (RDA) where no assessed value increases flow to the General Fund, are projected to increase by 4% in FY2008-09, 2% in FY2009-10 and 4% thereafter. Revenue from unsecured property taxes (such as airplanes) is projected to remain relatively flat throughout the forecast period. Pass-through revenues from the Earthquake Recovery RDA will approximate the rate of tax increment growth in the project area. State Public Safety Augmentation Fund is projected to grow at the sales tax growth rate. • Business License Tax -Revenues reflect a slower economic growth of the first part of the forecast period. Growth rates are projected at 3.7% in FY2008-09, 1.7% in both FY2009-10 and FY2010-11 (excluding the impact of Santa Monica Place closure) and 3.7% per year thereafter. The highest rates of growth are expected to be in the Professional and Service categories. • Transient Occupancy Tax -Hotel room rates continue to grow significantly and occupancy rates are considered "full occupancy". Based on information provided by PKF Consulting and the Santa Monica Convention and Visitors Bureau, Transient Occupancy taxes are projected to grow by 4.9% in FY2008-09. For the remainder of the forecast period, the rate of revenue growth is expected to be 4% per year, entirely due to room rental rate increases. The forecast also assumes the addition of two new 75 room hotels currently under development and the re- opening of another hotel that was closed for approximately one year. Based on the above, the General Fund revenues grow from $246.2 million in this fiscal year to $285.8 million in the fifth year of the projection (FY2012-2013). After factoring in the 10% Operating Contingency needs, the chart below shows growth in total resources available for operations and capital in the General Fund by year. A-5 The Five Year Financial Forecast also provides two alternative revenue scenarios for Santa Monica. These scenarios include a "worst" case alternative that is more pessimistic than the Baseline and a "best" case that is more optimistic than the Baseline. The "Worst" Case Scenario assumes that Santa Monica will be impacted by a recession for 1-2 years and changes in the loss of most .Utility Users Taxes from telecommunications. It should be noted that the "Worst" Case Scenario does not reflect all potential revenue impacts that could occur. The scenario is a pessimistic, not catastrophic, view of revenue risks. In this scenario, revenue reductions are reflected in: • Utility Users Tax -Legal challenges to the tax on telecommunications are reflected in this scenario. The "Worst" Case, estimates a loss of $10 million annually with ahalf-year loss in FY2008-09 of $4.8 million. • Property Tax - Assumes a significant impact of the housing downturn on Santa Monica. This scenario uses annual property tax growth rates equal the average of the worst five year experienced by Santa Monica period since Prop 13 was enacted. Revenue loss ranges from $0.2 million in FY2008-09 growing to $1.0 million in the fifth year • Sales Tax -Assumes lower sales in a recession holding revenue flat in FY2008- 09 over FY2007-08, then 3% growth in FY2009-10 and baseline growth in future years. The revenue loss ranges from $0.3 million in FY2008-09 which due to a lower base grows to $0.6 million in the fifth year. A-6 Business License Tax -Assumes that business growth will be significantly impacted by a recession holding FY2008-09 through FY2010-11 revenue growth to 1.7% annually with baseline growth in the last two years of the forecast. The revenue losses range from $0.5 million in FY2008-09 growing to $0.6 million in the fifth year. • Parking Facility Tax -Assumes that poorer economic conditions will impact parking activity in the City and lower the growth to 50% of the baseline growth in the first two years of the forecast and CPI thereafter. The revenue losses range from $0.2 million in FY2008-09 growing to $1.1 million in the fifth year. Transient Occupancy Tax -Assumes that a recession and high room rates will impact revenues. Under this scenario, the annual growth rate is held to CPI or 3% per year. The revenue losses range from $0.6 million in FY2008-09 to $2.4 million in the fifth year. • Interest Revenue -Assumes that the current low interest rate environment will extend for one or two more years. The impact on revenue would be a loss of $1.3 million in FY2008-09 and FY2009-10, $1.4 million in FY2010-2011 and $0.5 million in each of the last two years of the forecast. Theses assumption changes decrease General Fund revenues from $7.9 m in FY2008- 09 to $16.2 m in FY2012-13 over the Baseline Scenario General Fund Revenues "Worst" Case Scenario Millions $350 ~ All Other ~ Fees /Charges $300 _ ' r All Other Taxes $250 ^"~ "'" ~ Transient Occup $200 a Business License $150 ^ Property Tax ~ Sales & Use Tax $100 ®_`=° ... - -- - _ _ _" _ ®Utlity Users Tax $50 $0 FY07/08 FY08/09 FY09/10 FY10/11 FY11/12 FY12/13 Fiscal Year The "Best" Case Scenario assumes that Santa Monica will not be hit hard by the current economic instability and primarily reduces the impact of the current economic climate on Santa Monica revenues. This scenario makes modifications to four major revenues: A-7 • Sales Tax -Assumes increased sales tax revenues to the historical average growth rate of 5.7%, rather than the UCLA forecast of 3.0% to 4.5%. In addition, the "Best Case Scenario increases Santa Monica Place revenues following renovation to 100% increase rather than the 50% increase assumed in the Baseline Scenario. With these two modifications, FY2008-09 and FY2009-10 revenues increase $0.9 million and $1.6 million respectively. With the higher Santa Monica Place revenue option, increases in FY2010-11 are $2.6 million rising to $3.5 million in the fifth year. • Property Taxes -Assumes Santa Monica will not be hit hard by the downturn in housing sales and prices. Growth in revenues is set at a rate equal to the average of the last five years, or 5.3% annually. This assumption increases FY2008-09 and FY2009-10 revenues by $0.5 million and $1.3 million respectively, which grows to $3.0 million in the fifth year. • Business License Tax -Assumes that the recession will not affect Santa Monica businesses significantly. It reverses the slowdown assumed in the Baseline Scenario. This assumption increases FY2008-09 and FY2009-2010 revenues by $0.3 million and $0.8 million respectively, growing to $1.4 million in the fifth year. • .Fees and Charges -Assumes that a new fee study will be implemented in FY2011-12 adding $1.30 million in that year growing to $1.34 million in FY2012- 13. These modifications increase General Fund revenues from $1.7 m. in FY2008-09 to $9.2 million in FY2012-13. General Fund Revenues "Best" Case Scenario Millions $350 x All Other ___ ~ Fees /Charges $300 --' ___ QAIIOtherTaxes $250 ~ Transient Occup $200 iii ~ `s''. Business License :. Property Tax $150 a ~ i ~ Sales & Use Tax $100 I ®Utlity Users Tax $50 $0 FY07/08 FY08/09 FY09/10 FY10/11 FY11/12 FY12/13 Fiscal Year A-8 EXPENDITURE PROJECTIONS Primary Cost Escalator- Labor Government is primarily a service industry. Labor costs including associated fringe benefits comprise 60% of the FY2007-08 operating budget city-wide. For the General Fund, this percentage is 67%. Increases in these costs above the growth in revenues has led to an imbalance in ongoing revenues versus ongoing expenditures. Therefore, it is essential to maintain controls on the growth of the cost of labor while ensuring that labor rates and fringe benefits offered by the City of Santa Monica are competitive so that we can continue to draw quality job applicants and ensure retention of existing employees. General Fund Operating Expenses A-9 96% of total General Fund labor costs are controlled by three major components. 70% of the labor budget is salaries and wages. To control these costs, agreements with City labor groups escalate salaries and wages annually based on the Consumer Price Index (CPI) but limit annual increases to a maximum of 4%. Employer paid medical costs comprise 11 % of the labor costs and are capped at a fixed average contribution per employee. Currently, under existing labor agreements, increases in City costs are capped at 12% per year. Fifteen percent of the labor costs are for contributions to the California Public Employee Retirement System (CaIPERS). In the past, stock market volatility and benefit enhancements created uneven spikes in the contribution requirements. In the past few year, CaIPERS extended the payment period for under-funded plans and the recognition of credits for over-funded plans in order to minimize year-to-year contribution fluctuations. Expenditure Scenarios This year Baseline and "Best Case" scenarios have been developed for expenditures with the only change in assumptions being the labor costs increase. The Baseline scenario includes a 4% labor cost-of-living adjustment (COLA) across all forecast years. The "best case" scenario has a 4% COLA for FY2008-09 and 3% for the out years. Other expenditure assumptions in both scenarios include: Medical insurance costs inflated at a Memorandum of Understanding (MOU) cap of 12% per year Retirement costs reflect CaIPERS actuarial estimates for FY2008-09 and FY2009-10. FY2010-11 through FY2012-13 are projected slightly above prior years and estimated to remain flat based on conversations with Santa Monica's CaIPERS representative. In general, supplies and expenses are projected to increase at CPI for FY2009- 10and beyond. A $200,000 set-aside for fuel increases is included. • Capital Improvement expenditures are primarily flat for ongoing expenditures with variations for known internal service fund contributions such as vehicle and computer replacements. Contributions for one-time projects are held flat at $3.0 million per yeas Balance Sheet Transfers assume General Fund loans to subsidize other funds such as the Civic Auditorium, Cemetery, Beach and the Housing Authority which is losing federal funding for administration expenses. Transfers to the Pier fund to support operations are included in the Non-Departmental supply and expense line item in the budget. Additional FY2007-08 anticipated Mid-Year increases have been added for ongoing costs at $0.3 million per year. • Enhancements included in the five-year forecast reflect the operating costs of 415 PCH reflected in the Beach Fund subsidy. A-10 The resulting expenditure projections show Baseline Scenario (4% labor increases) budgets increasing from $249.8 million in FY2008-09 to $300.8 million in FY20012-13. Labor Supplies and Expenses Capital Subtotal Expenditure Growth Balance Sheet Transfers Total Uses Growth Baseline Expenditure Growth FY08/09 FY09/10 FY10/11 FY71/12 FY72/13 $ 170.2 179.7 189.8 200.8 212.3 61.2 64.0 (i5.ti 67.7 70.2 16.7 13.8 14.0 14.0 14.0 248.1 257.5 269.4 282.5 296.5 3.8% 4.8% 4.9% 5.0% 1.7 2.4 3.4 3.9 4.3 $ 249.8 259.9 272.8 286.4 300.8 4.0% 5.0% 5.0% 5.0% The "Best Case Scenario, with labor cost-of-living increases limited to the anticipated CPI of 3% in all but the first year of the forecast, slows the expenditure increases by $6.9 million in the final year. A-11 "Best" Case Expenditure Growth Labor Supplies and Expenses Capital Subtotal Expenditure Growth Balance Sheet Transfers Total Uses Growth FY08/09 FY09/10 FY70/11 FY71/12 FY12/13 $ 170.2 178.2 186:7 195.9 205.4 61.2 64.0 65.6 67.7 70.2 16.7 13.8 14.0 14.0 14.0 248.1 256.0 266.3 277.6 289.6 3.2% 4.0% 4.2% 4.3% 1.7 2.4 3.4 3.9 4.3 $ 249.8 258.4 269.7 281.5 293.9 3.4% 4.4% 4.4% 4.4% General Fund Expenditures "Best" Case Scenario Millions $350 $300 _ ==_ $250 -- ~ ^ Balance Sheet Transfers $200 o Capital $150 ®Supplies & Expenses $100 s Labor $50 $0 FY08/09 FY09/10 F1'10/11 FY11/12 FY12/13 Fiscal Year A worst case scenario for expenditures is not proposed since expenditures are discretionary and there will always be additional expenditures that are not assumed in the baseline scenario. BUDGET GAPS With the revenue projections plus available balance sheet resources and the expenditure projections, the City financial forecast shows a structural deficit in both the baseline and worst case scenarios. A structural deficit is defined as a budget where ongoing revenues are not sufficient to cover ongoing expenditures at current service levels. A-12 The baseline scenario shows a General Fund deficit beginning in FY2009-10 of $3.7 million and growing to $16.4 million in the fifth year of the Forecast. • Slower revenue growth • Santa Monica Place renovation • Two new hotels • Maintenance of UUT on telecomm • 4% CPl on labor costs • CPI on Supplies & Expenses The worst case scenario shows a General Fund structural deficit of $8.0 million beginning next fiscal year (FY2008-09) due to the reduced revenue projections identified above. This deficit grows to $32.6 million in the fifth year. • Recession impact on most revenues • Loss of UUT on telecomm • 4% CPI on labor costs • CPI on Supplies and Expenses A-13 The "Best" Case Scenario, which projects a rosier revenue outlook and lower labor projections, is essentially balanced throughout the full five year period. This is by far the least likely of all scenarios since it assumes that the economic downturn will not impact Santa Monica to any significant degree and that all labor costs increases will be held to 3% for years two through five. • No recession impact • Maintaining UUT on telecomm • Higher Santa Monica Place revenues • 3% CPI on labor costs • CPl on Supplies and Expenses A-14 Other Funds Other major funds that are reviewed during the Five Year Forecast fall into three categories: Enterprise funds that are operated to generate sufficient revenues to sustain necessary operation and capital needs o Airport (33) /Special Aviation (52) o Big Blue Bus (41) o Solid Waste (27) o Wastewater (31) o Water (25) Enterprise funds that require General Fund subsidies in order to meet their operating and capital needs o Housing Authority (12) o Cemetery (37) o Civic Auditorium (32) o Pier (30) Special Revenue Funds where fund are restricted by law for specific purposes o Beach (11) -Per the CAFR these are legally restricted to expenditures for specified purposes; also the agreement with the State asserts that beach revenue may only be used to support beach activities. o Housing Authority (12) For these funds, only one expenditure scenario is developed which is the baseline forecast where labor costs are increased from the FY2008-09 Budget Plan year at 4% per year beginning in FY2009-10. In general, fee and utility rate revenues are assumed to increase at CPI. Where funds show a structural deficit, higher fee and rate increases are proposed as alternatives. In summary, the funds status is: NON-SUBSIDIZED ENTERPRISE FUNDS Airport -During the five year forecast period, the fund maintains a positive fund balance; however, only minimal capital expenditures are assumed and no re- payments to the General Fund are assumed on loans totaling $9.5 million until 2015 when rental rates on lease contracts are due for renewal and can be adjusted to market rate. Recent loans to the Airport fund include $2.4 million for capital expenditures in FY2004-05 and $250,000 this year for litigation costs related to airport operating issues with the Federal Aviation Administration. Big Blue Bus -The forecasting of the status of the Big Blue Bus Fund is different from other funds in that funds available to the Big Blue Bus (BBB) are A-15 not always held by the City but are available from the Los Angeles Metropolitan County Transportation Authority (MTA) in the form of grant subsidy funds per the formula share allocated by the MTA to BBB. Annual allocations of funds not spent in the year of allocation are available up to two years later for use by the transit system. The majority of the subsidy funds, including State transit Assistance Fund (STA), Transportation Development Act funds (TDA), Proposition A and Proposition C are sales tax based and grow by the sales tax growth rate of the County of Los Angeles. For the purposes of this forecast these funds are used sales tax growth assumptions from UCLA Anderson School of Management adjusted for MTA projections and department staff assessment. The baseline forecast includes additional STA revenues from Proposition 42 beginning in FY2008-09 of $1.2 million. However, given the State's budget crisis, it is not clear whether the State will borrow transportation funds again to close the budget gap. At this moment Big Blue Bus staff is cautiously optimistic and believes that the STA funds will be left in tact. A structural operating deficit still exists for the BBB and unless a fare increase is adopted, the Big Blue Bus will be required to use available prior year subsidy funds in FY2008-09 ($1.0) and FY2009-10 ($2.6). In future years the forecast shows insufficient revenues to cover expenditures. BBB anticipates proposing to Council a fare increase for FY2008-09. A study is currently being conducted to assess operational efficiencies and financial capacity of the organization. Solid Waste Fund -The baseline forecast for the Solid Waste Fund assumes rate increases by CPI and services provided by City staff remaining at the FY2007-08 levels. At this rate, the. Fund's expenditures will exceed its revenues, depleting its Rate Stabilization Reserve ($0.5 m) in FY2008-09. The structural deficit continues each year with dwindling reserves in FY2009-10 ($1.8 m.) and FY2010-11 ($0.6 m) until FY2011-12 when all reserves are depleted and the fund is in a deficit of $0.8 m growing to $2.7 m in FY2012-13. In November, Council authorized the City to take control of all commercial collections, beginning January 2009. Staff has also been reviewing options for a public-private partnership regarding transfer station operations. These changes are not included currently n the baseline forecast, but will impact the forecasted fund balance and future rate changes. An updated fund balance forecast will be presented to Council in the next few months as a new public-private partnership for the transfer station is implemented. Water Fund - Under a baseline scenario where rates increase at CPI, the fund in FY2009-10 will use almost $900,000 of the $1.0 million Rate Stabilization Reserve to fund operations. By FY2010-11, all reserves are depleted (operating, rate stabilization and capital) with a total fund deficit of $0.8 million growing to $9.6 million with no reserve funds. Based on this analysis, rate increases above CPI are required. A-16 The baseline forecast does not consider any impacts of a new Water Master Plan, which is expected to be developed over the next several months. The Water Fund is undergoing a rate study to evaluate the fund's ability to sustain services. It is anticipated that rate recommendations, along with more detailed financial information, will be presented to City Council in February with implementation of changes prior to the end of the fiscal year. Wastewater Fund -The baseline scenario reflects a fund deficit in the current fiscal year of 6.0 million growing to $46.4 million in FY2012-13. However, the fund has fronted $6.5 million in earthquake related construction funds that are anticipated to be reimbursed by FEMA by FY2009-10. If these funds were loaned by another fund, the Wastewater Fund will end the fiscal year on a more positive note. Staff is studying other factors that could improve the fund position, but these are not included in the baseline scenario. These options, along with proposed rate increases will be presented to City Council in February for consideration. SUBSIDIZED ENTERPRISE FUNDS Cemetery Fund -Under the baseline scenario, subsidies from the General Fund to the Cemetery Fund are necessary throughout the five year forecast period. FY2008-09 requires $0.3 million growing to $0.6 million in FY2012-13. Over the past two years, staff has pursued several measures to improve the maintenance and operations of the Cemetery and a Business Plan is currently in the final stages of completion. It is anticipated that the Plan will call for expansion capacity on the Cemetery property requiring additional capital investments which will over time return higher revenues to the Fund. Financing options will be included in the Business Plan. Civic Auditorium -The Civic Auditorium requires an ongoing annual General Fund subsidy of $0.7 million in FY2008-09 and from $1.5 to 1.6 million in FY2009-10 through FY2012-13. This baseline forecast does not include major infrastructure improvements, which would increase the subsidy. Pier Fund -The Pier Fund generates approximately $3.2 million in revenue and has operating expenses of $4.2 million for FY2007-08. The structural deficit requires a General Fund subsidy for the Fund to remain in balance. The subsidies required annually are $1.1 million in FY2008-09 growing to $1.6 million in FY2012-13. As with the Civic Auditorium Fund, the Pier Fund baseline forecast does not include major infrastructure improvements. CIP needs have been identified as $5.3 million in FY2008-09 for infrastructure improvements with $3.0 million annually thereafter for ongoing maintenance and capital programs. Housing Authority Fund -This year, the Five Year Financial Forecast indicates the Housing Authority for the first time will require subsidy funds in order to maintain the same level of service currently provided. Declining Federal A-17 subsidies have reduced the funding below the level needed to administer the City's housing programs. The subsidies required annually are $0.2 million in FY2008-09 growing to $0.5 million in FY20012-13. SPECIAL REVENUE FUNDS Beach Fund - A baseline scenario for the Beach Fund where the Annenberg Community Beach House operating expenditure are incorporated into the budget in FY2009-10 shows a need for Beach Fund subsidies of $0.2 m in FY2010-11 growing to $2.0 million in FY2012-13. This scenario does not include any County Lifeguard costs above CPI. The City and the County have been on a month-to- month agreement since December 31, 2006. Also not included are additional one-time costs for the refurbishment of the Lifeguard Headquarters building. An estimated $1.6 million will be requested by Community & Cultural- Services Department as part of the FY2008-09 Capital Improvement Program budget requests. Each of these funds will be updated and further addressed during the development, presentations and discussions on the FY2008-09 budget. A-18 ATTACHMENT B Update on FY2007/O8 Community Priorities Work Plan FY2007-08 budget adoption established the Community Priorities Work Plan to be addressed by departments over the current and next few fiscal years. Highlights of accomplishments to date on these work plans include: Special Focus Areas Homelessness • Outdoor meal providers were moved in September from temporary quarters at 612 Colorado to the new OPCC Access Center • A community input and coordination process has begun for the community education campaign on homelessness The City, through Mayor Richard Bloom, participated in the National Mayor's Summit to End Homelessness in November and signed the America's Road Home Statement of Principles and Actions.. • A consultant has been selected to provide the City with a homeless management software system In support of affordable housing, infrastructure replacement, repairs and building code compliance continues to be made at the Mountain View Mobile Home Park. Pacific Court affordable housing project funded by Housing Trust Funds was dedicated in October and will provide 44 new affordable homes for large families Lane Use and Circulation Element Update • Eight community-wide Land Use and Circulation Element Update workshops have been held on the following key topics: Neighborhood Focused Placemaking Workshops (4), IndustYial Lands Workshops (2) and Transportation and Mobility Workshops (2). Two transportation workshops were held to identify city-wide approaches to increasing ridership on alternative modes of transportation. Youth • Expanded youth employment programs by creating 10 new student work and apprentice position for high school girls under the Rosie's Girls program Expanded Teen Center evening hours at Virginia Avenue Park Expanded programs supporting parents of youth participating in programs at Virginia Avenue Park • Completed the first installment of semi-annual status report on gang violence reduction. Homework assistance is currently being provided through the Library through the LiveHomeworkHelp.com service and Youth Services Librarian assigned to serve as liaison to each school B-1 • Basic computer skill and keyboard tutorial training is being provided at PAL by Library staff. Community Priorities Culture • Extended integrated arts/social service model at Virginia Avenue Park Teen Center to younger park users. • The Norton Family Foundation pledged support to Glow, Santa Monica's new arts festival Sustainability • Presented conservation strategies to preserve the private tree canopy to the Planning Commission in September • Approval was received from the Coastal Commission for the Beech Greening Project, with contract awarded in October and planned completion by the end of the fiscal year. • Environmental Programs staff has expanded efforts to educate the community about the importance of water efficiency, especially during drought conditions, and help reach the Sustainable City Plan goal of reducing water use 20% by 2010 • Santa Monica joined the Consortium of Sustainable Cities with the goal of continuing the development and promotion of innovative sustainable city practices. • The 2007 Sustainable City Report Card was released on September 20, 2007 The non-recyclable food service container ban will take effect on February 8, 2008 and more than 680 businesses received information to assist them in making the transition to approved packaging. Implemented improvements for bicyclists by installing new bike racks and bike detectors • MiniBlue bus service implemented • Installation of 50 Solar Santa Monica project sites to be completed by spring 2008 and report on Phase I I of the project set to go to Council. • Beginning in November, the Santa Monica Farmer's Market began offering to City employees a Market Basket program allowing employees to enjoy produce from the Wednesday market even if they can't get to the Market location. Education The City received Safe Routes to Schools grant in the amount of $197,000 for outreach and education for bicycle and pedestrian programs to be presented at middle and elementary schools. • Developed a phased plan for a coordinated and effective service system, including multi-agency participation on a Youth Resource Team, for school- based mental health programs • Released funding for Barnum Hall audio equipment B-2 Customer Service • Established an internal project review and approval team for all phases of building, permitting and inspection functions. • Established policies and procedures for proactive zoning code enforcement for compliance and quality of life concerns to maintain and upgrade an aging housing stock and the surrounding neighborhoods. • Formalized a review of community program relevance and quality of programs funded by the Human Services Division. • Selected a graphic designer and programming vendor to enhance the style, graphics and navigation for the City's website. • The City implemented new software which allows the Geographic Information System (GIS) to display data in three dimensional format (3-D). • Business License renewal process was improved to provide renewal notices two weeks earlier than in previous years along with greater outreach efforts to remind business owners of the deadline for filing. • The City's internal service departments (Finance, Information Systems, Human Resources and Community Maintenance) completed a survey of employee satisfaction with services provided. • The Traffic Division conducts enforcement saturation operations throughout the City addressing specific areas of concern expressed by Santa Monica residents, as well as those observed by traffic personnel and Gridlock Abatement Program operations to facilitate traffic flow. • Installation of free wireless Internet (Wi-Fi) was completed this year at the County Courthouse, Memorial Park, and Chess Park. • A workshop for small businesses on "Doing Business in Santa Monica Made Easy' was held in October in collaboration with the Small Business Development Center of Santa Monica College. • In November, purchase of the SantaMoniCard (parking meter debit card) was made available at the Main Library, Revenue/Treasury Office as well as the Parking Office. • Evaluated the current developmerit review processes to identify improvements. • Held meeting with residents and businesses on new preferential parking zones and met with the Wilmont neighbors on parking recommendation and potential angled parking opportunities. • Began construction of Phase 2 of the City-wide Traffic Signal Upgrade project • The Big Blue Bus opened its new Transit Store and Customer Service Center at 223 Broadway in November providing a more convenient location to the public to find transit related information and purchase fare media. Capital Needs & Infrastructure • Construction began in September on the new Maintenance Facility for the Big Blue Bus. This long planned project is scheduled take two and a half years to complete and provide a better facility in which to maintain the BBB bus and service vehicle fleet. • Senior Recreation Center upgrades began in December B-3 • Sidewalk repair contract has been awarded and work is scheduled to begin in Ocean Park neighborhood in early 2008. A Request for Proposals was issued for design build services for the Charnock water treatment plant. Contract for MTBE public information and outreach has been awarded. Recreation & Active Living • Integrated youth fitness into Virginia Avenue Park programs by adding information recreation and sports on weekends and after school for 30 youth. • Euclid Park opened on July 15, 2008 and 10 new community gardening plots were added to the park along with the implementation of gardening workshops. • Bike Valet service was offered this summer for the Twilight Dance Series with over 500 bikes handled each Thursday evening.. • Staff from Transportation Management, Human Services and the Big Blue Bus provided information to Santa Monica High School students and their parents on alternative and active modes of travel. • In November a public meeting was held on programming input for the Annenberg Community Beach House currently under construction. • A public workshop was held on commercial surf activity (surfing schools) at the beach B-4 Additional attachments available for review at City Clerk's Office.